Good Cotton Output Expected, Imports May Be Cut

The early arrival of monsoon rains has prompted many Indian cotton millers and traders to cancel or settle their import contracts, with expectations mounting that the South Asian nation would have a bumper crop of the textile fabric this year.

Contracts worth about 2 lakh bales (each bale of 170 kg) have already been settled after the annual rains hit the peninsular coastline ahead of schedule. Nayan MI countryi, president of the Cotton Association of India said: “Some import contracts have been mutually cancelled, possibly reducing the import quantity for this year.”

According to traders, cancellations occurred after the New York ICE cotton prices spiked mid-May. Simultaneously, concerns about the adverse impact of El Nino on Indian monsoons began fading, making cancellations mutually beneficial.

India’s 2016-17 cotton imports were expected to touch an all time high of 30 lakh bales. However, traders now expect imports to come down. “The total imports will not be more than 25 lakh bales,” said BS Rajpal, a trader from Maharashtra.

Because of constraints in domestic supplies, higher local prices due to the fall in arrivals after the demonetisation, and cheaper availability of good quality cotton overseas, India's imports were expected to be record high in 2016-17.

However, because of good seed sales and the early arrival of rains, traders expect India to harvest a bumper crop. “Cotton seed sales have been good and rains are also good. Cotton prices are better when compared to other crops,” said Atul Asher, honorary secretary, Indian Cotton Federation.

According to the latest report of the United States Department of Agriculture (USDA), 2017-18 cotton production is expected to increase because of a rise in the area under cultivation. “Consumption is forecast higher also, both in China and the rest of the world. Trade is forecast up as stronger imports by Vietnam and Bangladesh more than offset lower imports in India, Pakistan, and Mexico,” said the report.

“For 2016-17, global use is raised, while production is down marginally, resulting in lower global ending stocks,” according to the report.